Risk & Compliance

FTC Challenges Sale of Wesson Cooking Oil

The commission says JM Smucker's proposed purchase of the brand from Conagra would lead to higher prices for retailers and consumers.
Matthew HellerMarch 6, 2018

The U.S. Federal Trade Commission has sued to block JM Smucker’s proposed acquisition of Conagra Brands’ Wesson cooking oil brand, saying the deal would eliminate the “vigorous head-to-head competition” between the companies at the expense of consumers.

Smucker, which owns the Crisco brand, would control at least 70% of the market for branded canola and vegetable oils sold to grocery stores and other retailers if it acquired the Wesson brand, the FTC said in a statement.

“Cooks across the U.S. benefit from the competition between the staple brands Wesson and Crisco. We are taking this action to preserve the benefits of that competition,” Ian Conner, deputy director of the FTC’s Bureau of Competition, said in a news release.

“After attempted price increases by each brand over the last two years were limited by intense competition from the other, this transaction eliminates that restraint and would allow Smucker to raise prices on both brands,” he added.

Conagra announced in May 2017 that it would sell Wesson to Smucker for about $285 million. Smucker expects the deal to add about $230 million to its annual net sales.

But the FTC said the acquisition was “likely to increase Smucker’s negotiating leverage against retailers, especially traditional grocers, by eliminating the vigorous head-to-head competition that exists between the Crisco and Wesson brands today.”

According to the commission, Smucker’s own internal documents acknowledge that eliminating price competition between Crisco and Wesson is a central part of its rationale for the acquisition. “The transaction would give Smucker the ability to raise prices to retailers, ultimately leading to higher prices for U.S. consumers,” the FTC said.

The commission also noted that while other branded canola and vegetable oils such as Mazola and LouAna are available in the U.S., “they each control only a small share of the market, and building sufficient brand equity to expand would require substantial investment and take at least several years.”

Conagra said it had worked “diligently for the last eight months to respond to the FTC’s inquiries about the transaction” and was “very disappointed by and disagree[s] with the Commission’s decision.”